During the midst of the COVID-19 pandemic, the housing market in the United States experienced a massive boom driven by low interest rates on home mortgages. During this period of time, competition amongst buyers grew so fierce that many people were often actually bidding over the asking price and even purchasing some properties sight unseen.
Open houses often drew long lines, and soon sellers were jacking prices up to record levels due to the intense demand. Truly, this was the very definition of a “seller's market,” and the industry began driving very real concerns of affordability and sustainability for the average family.
Fast-forward to today, and the Federal Reserve – in an attempt to curb the 40-year high inflation that currently holds the nation in its icy grip – has raised interest rates several times. This has had a corresponding effect on home mortgage interest rates, which have gone from a low of 2 to 3 percent during the pandemic to a current high in the neighborhood of 7 percent, spelling an end to the cheap money that fueled the housing boom just a year or two ago.
Artisan Mortgage Company is a wholesale mortgage broker based out of Bay Shore, NY, and according to President Jim Barry – who founded the company in 2005 – the real estate market is currently a hotbed of uncertainty, with many who may be looking to purchase a home currently scratching their heads and wondering what to do.
“Inflation is the number one issue with the economy right now. The Fed has been driving up rates, and that’s increased the interest for the average 30-year fixed conventional home loan,” he said. “A lot of homebuyers are now paying $1,000 or more a month to own that same home with these current rates. We had a very strong seller's market for a few years here, and we're going to be transitioning more to a buyer's market. It's going to take some time for the sellers to realize this, but this is happening.”
“But currently, buyers are not willing to pay those numbers,” Barry continued. “And for the sellers, they need to be conservative in their list price or they need to be willing to negotiate the terms of the deal, or they may have to actually pull it off the market, because the strength of the demand is no longer there.”
Of course, the main question on every prospective buyer’s mind right now is, “should I wait things out and hope they improve, or should I just bite the bullet and take the plunge now?” Barry said that answer depends entirely on your personal circumstances.
“Every person is different. People need to buy homes, and they're always going to buy homes,” he said. “I definitely tell buyers to be more diligent in what they're looking at, to be patient, and that they should regularly check in with me so I can check on numbers for them so they know potentially what these homes are going to run them month and month.”
However, Barry said that he's noticing a lot of buyers getting potentially bad advice when it comes to buying homes in today's market.
“Some people are telling buyers that ‘yeah, I know it's $1,000 more a month, but rates will go down next year and you can just refinance,’” he said. “And conservatively, we're all hoping that rates do indeed go down in the future, but you can't bank on that. You need to be able to afford the home at the current price because there are no guarantees in this industry.”
High home prices – coupled with high mortgage interest rates – are an especially vexing issue on Long Island, where the cost of living is already higher than the national average, Barry said.
“Long Island indeed has a very high cost of living, and I think that the pain is yet to come,” he said. “I think the winter is going to be a slow market for sales, and people are going to be a little bit more patient. But the situation also brings rentals back, because a two-bedroom apartment you were looking at last year may have seemed expensive, but compared to mortgage payments now with the current high interest rates, that apartment may not look so expensive anymore.”
“Purchasing is always a play between the cost to rent versus the cost to own,” Barry continued. “And when those numbers are similar, people are going to buy homes. But now that the cost of owning a home is much more expensive than the cost to rent, it's a tougher decision to make.”
On Long Island especially, Barry noted, housing has always been – and always will be – very high in demand, often far outstripping the available inventory.
“We're not really building a ton of new homes here on Long Island,” he said. “You do see a push throughout Long Island for these large rental complexes, and that's where we're adding housing units to our market, but we're not building as many homes here anymore, simply because the space is just not there.”
Ultimately, the key to successfully finding and purchasing a home in today's rough real estate marketplace is to be patient, be careful, and engage the services of a knowledgeable expert to guide you through the process. And that's where Artisan Home Mortgage comes in.
Barry notes that unlike larger firms, with Artisan you'll always have a clear and open channel of communication to your agent at any time that you need them; it's that personal touch that sets Artisan apart from the competition, he said.
“In the real estate mortgage industry, it's all about checking with your clients, following up on people, making sure that you're answering phone calls and answering emails in a timely fashion and being available to your customers. It's super important,” he said. “How many times a day in corporate America when you want to call and ask them a question and you’re asked to chat with an automated assistant and not a person?”
“We're a small mom and pop company and we're available,” Barry added. “People look for more personal guidance and a direction, and that's what they get with Artisan. We try to keep it personal and we try to make sure that we're interacting and being a support for consumers that are looking to buy homes so we can provide our best guidance for them.”
To find out more, please visit https://www.artisanhomemortgage.com or call 631-859-9414.